Once a dispute is resolved, it’s resolved, at least according to a court in the Northern District of Illinois. In a recent victory for debt collectors, a consumer alleged that a debt buyer should have known about a previously resolved dispute and thus violated the Fair Debt Collection Practices Act (FDCPA) by reporting the debt to the credit bureaus without reflecting said dispute. In the court's eyes, however, since the consumer never conveyed the dispute to the debt buyer, reporting the debt without it did not violate the FDCPA.

In Wood v. Security Credit Services (Case No: 2020-CV- 02369, N.D. Ill. 2023), the consumer disputed the debt with the original creditor. The original creditor determined the debt to be valid and informed the consumer about the results of its investigation. Using the Metro 2 Format, the original creditor reported the account with an XH code stating that the debt was previously disputed and that the debt collector had completed its investigation. The original creditor did report any other Metro 2 code with respect to the debt, including “XB,” which signifies that a consumer disputes the debt, or “XC,” which reflects that the creditor completed its investigation of a consumer’s dispute, but the consumer disagrees with the results.

Security Credit Services (SCS) subsequently purchased the account and reported it to the credit bureaus. The consumer filed an FDCPA suit against SCS, alleging that he still disputed the account thus SCS had not properly reported the debt. Upon receipt of the FDCPA lawsuit, SCS reported the debt using XB to signify the consumer disputed it. SCS moved for summary judgment, arguing that after the consumer failed to respond to the original creditor's validation letter, the debt was no longer disputed under the FDCPA.

The court agreed with SCS and ruled in its favor. The deciding factor in the case was that the consumer did not continue disputing the debt after it was validated. In the court's view, the debt collector could not be expected to know that the consumer still disputed the debt when the consumer did not respond to the original creditor's validation of the debt. The court explicitly stated, “when a debt collector investigates a dispute and communicates the results to the consumer, the dispute is resolved unless the consumer indicates that it disagrees with the results.”  

Read the full case here

insideARM Perspective: 

This ruling should be viewed as a significant win for debt collectors. It puts the burden on the consumer to show that a debt collector is aware of their ongoing dispute and makes it the consumer's responsibility to continue disputing a validated debt. If the consumer fails to do so, the debt collector is not obligated to report it as disputed. 

This ruling provides clarity on reporting standards and offers protection to debt collectors who accurately report on debts and comply with requirements. While debt collectors should remain thorough in their investigations and conservative in their interpretation of a consumer’s dispute, this ruling should have them feeling confident in situations where the consumer did not continue to dispute a validated debt. 

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